BEIJING (Reuters) - Only China's yuan could rank with the dollar and euro as pillars of the global monetary system, given time and five key tests, Hong Kong's former Monetary Authority chief Joseph Yam was quoted as saying.
SHANGHAI: China weakened its currency for the third consecutive day Thursday, but financial markets that had been shaken by the surprise devaluation took heart as authorities pledged not to let the yuan plummet. The central bank trimmed the reference rate for the yuan -- also known as the renminbi (RMB) -- by 1.11 percent to 6.4010 yuan for $1, the China Foreign Exchange Trade System said, from the previous day's 6.3306. The cut was less than previous two days and came after reports the People's Bank of China (PBoC) intervened Wednesday to stem the yuan's fall.
Reuters/Kevin LamarqueWhen senior officials from Washington and Beijing meet next month to discuss a series of thorny issues, China might also try to seek clearer clues on the US Federal Reserve’s next move, analysts said.
The prospects of a rate increase in June have risen in recent days, and talk of higher borrowing costs in the US has driven down the yuan.
On Monday, we brought you two charts which vividly demonstrated market expectations for the abandonment of more currency pegs in the wake of Kazakhstan’s decision to float the tenge and China's "unexpected" move to devalue the yuan. As you can see from the following, the market seems to be convinced that Saudi Arabia and UAE, under pressure from falling crude revenue, will ultimately be either unwilling or unable to maintain their dollar pegs (incidentally, the Saudis did succeed in jawboning USDSAR forwards down 125bps on Tuesday):
I remain in "negative awe" of China bulls who think the yuan is going to soon replace the US dollar as the world's reserve currency.As I have pointed out before - China's bond market is nowhere big or liquid enough; China's property bubble is the world's biggest; China's shadow banking system is on the verge of implosion, and Chinese growth is imploding.Readers know full well that I am not prone to US flag-waving.
Tired of tapering talk? Well, just a bit more; but, then on to more pressing matters, such as the Occidental/Oriental monetary fulcrum and just upon whom (or what) this seesaw sits. Seems an investment in China might just not be what it seems to be. Think Three Paddy Hat Monty.
China is the world's second largest economy, yet it exercises tremendous capital control including restrictions on its currency, the renminbi. Chinese officials have previously said that they want to make the currency fully convertible by 2015.
By Noah Feldman The International Monetary Fund's decision to designate the Chinese renminbi, commonly known as the yuan, as a global reserve currency will, over time, encourage the country's leadership to make the currency more tradable. But the political implications of global reserve status may be more significant than the economic ones.
Last week's decision by MSCI not to include Chinese shares in its primary emerging-markets stock index has been viewed — widely and rightly — as a blow to China's hopes of internationalising its financial sector. There's worse news, though: Even the progress China's made thus far is in danger of going into reverse.
SHANGHAI: China's yuan closed firmer against the dollar on Thursday as traders cited large transactions by state-owned banks possibly on behalf of the central bank, which supported the Chinese currency in both spot and derivative markets. "Major state banks did some large deals, supporting the yuan's value," said a dealer at a European bank in Shanghai.